From time to time, including in this Quarterly Report on Form 10-Q, we may make forward-looking statements relating to such matters as anticipated financial performance, business prospects, strategy, plans, regulatory, market and industry trends, and similar matters. The Private Securities Litigation Reform Act of 1995 and federal securities laws provides a safe harbor for forward-looking statements. We note that a variety of factors, including known and unknown risks and uncertainties as well as incorrect assumptions, could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The factors that may affect the operations, performance, development and results of our business include those discussed under Part II, Item 1A, "Risk Factors" of this Quarterly Report on Form 10-Q.

As used in this Form 10-Q, "we", "us", "our", "SkillSoft" and "the Company" refer to SkillSoft Public Limited Company and its subsidiaries; and references to our fiscal year refer to the fiscal year ended on January 31 of that year (e.g., fiscal 2009 is the fiscal year ended January 31, 2009).

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and notes appearing elsewhere in this Quarterly Report on Form 10-Q.

OVERVIEW

We are a leading Software as a Service (SaaS) provider of on-demand e-learning and performance support solutions for global enterprises, government, education and small to medium-sized businesses. We enable business organizations to maximize business performance through a combination of comprehensive e-learning content, online information resources, flexible learning technologies and support services. Our multi-modal learning solutions support and enhance the speed and effectiveness of both formal and informal learning processes and integrate our in-depth content resources, learning management system, virtual classroom technology and support services.

We generate revenue primarily from the license of our products, the provision of professional services and the provision of hosting and application services. The pricing for our courses varies based upon the content offering selected by a customer, the number of users within the customer's organization and the length of the license agreement (generally one, two or three years). Our agreements permit customers to exchange course titles, generally on the contract anniversary date. Hosting services are sold separately for an additional fee.

Cost of revenue includes the cost of materials (such as storage media), packaging, shipping and handling, CD duplication, custom content development, hosting services, royalties, certain infrastructure and occupancy expenses and share-based compensation. We generally recognize these costs as incurred. Also included in cost of revenue is amortization expense related to capitalized software development costs and intangible assets related to developed software and courseware acquired in business combinations.

We account for software development costs in accordance with Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" (SFAS 86), which requires the capitalization of certain computer software development costs incurred after technological feasibility is established. No software development costs incurred during the three and six months ended July 31, 2009 met the requirements for capitalization in accordance with SFAS 86.

Research and development expenses consist primarily of salaries and benefits, share-based compensation, certain infrastructure and occupancy expenses, fees to consultants and course content development fees. Selling and marketing expenses consist primarily of salaries and benefits, share-based compensation, commissions, advertising and promotion expenses, travel expenses and certain infrastructure and occupancy expenses. General and administrative expenses consist primarily of salaries and benefits, share-based compensation, consulting and service expenses, legal expenses, audit and tax preparation costs, regulatory compliance costs and certain infrastructure and occupancy expenses.

Amortization of intangible assets represents the amortization of customer value, non-compete agreements, trademarks and tradenames from our acquisitions of NETg, Targeted Learning Corporation (TLC), Books24x7 and GoTrain Corp. and our merger with SkillSoft Corporation (the SmartForce Merger).

Merger and integration related expenses primarily consist of salaries paid to NETg employees for transitional work assignments, facilities, systems and process integration activities.

Restructuring expenses primarily consist of charges associated with our recent reduction in force as described in our Form 8-K filed with the SEC on January 20, 2009.

SEC investigation expenses primarily consist of legal and consulting fees incurred in connection with the SEC's review of SmartForce's option granting practices prior to the SmartForce Merger.

BUSINESS OUTLOOK

In the three and six months ended July 31, 2009, we generated revenue of $78.9 million and $155.4 million, respectively, as compared to $83.3 million and $165.0 million in the three and six months ended July 31, 2008, respectively. We reported net income in the three and six months ended July 31, 2009 of $17.2 million and $36.0 million, respectively, as compared to $12.9 million and $20.0 million in the three and six months ended July 31, 2008, respectively.

While we have achieved increased operating income and net income from last fiscal year's comparable period, we have experienced during the last year a significantly more cautious customer spending environment due to the current challenging global economic climate. In addition, we continue to find ourselves in a challenging business environment due to (i) budgetary constraints on training and information technology (IT) spending by our current and potential customers, (ii) price competition and value-based competitive offerings from a broad array of competitors in the learning market and (iii) the relatively slow overall market adoption rate for e-learning solutions. In recent months, the challenging U.S. and global economic environment has placed further constraints on our customers' and potential customers' IT budgets and spending. We have not yet seen signs of an improving customer environment, but we are also not experiencing continued deterioration. We have also encountered longer sales cycles due to additional customer scrutiny on deals. This has given us less visibility into the overall timing of our sales cycles. Despite these challenges, our core business so far this fiscal year has performed in accordance with our expectations. We expect our revenue to decline approximately 6% to 7% this fiscal year as compared to last fiscal year primarily due to recent changes in foreign exchange rates and the negative effect they have on our international subsidiaries' revenue when converted to U.S. dollars. However, given the volatility of foreign exchange rates, our forward-looking estimates, which are based on July 31, 2009 rates, could change materially. Despite the expected decrease in revenue, we anticipate an increase in our operating income and net income this fiscal year as compared to last fiscal year, primarily due to a number of actions we took in the fourth quarter of fiscal 2009 to reduce our cost structure. These cost-saving initiatives allow us flexibility to manage our costs in light of the difficult economic conditions we are facing. Despite these cost-savings initiatives, we have recently added, and will continue to add, additional sales resources in response to the cautious customer spending environment.

In fiscal 2010 we will continue to focus on revenue generation and earnings growth primarily by:

• cross selling and up selling;

• looking at new markets;

• acquiring new customers;

• carefully managing our spending;

• continuing to execute on our new product and telesales distribution initiatives; and

• continuing to evaluate merger and acquisition and possible partnership opportunities that could contribute to our long-term objectives.

CRITICAL ACCOUNTING POLICIES

We believe that our critical accounting policies are those related to revenue recognition, amortization of intangible assets and impairment of goodwill, share-based compensation, deferral of commissions, restructuring charges, legal contingencies and income taxes. We believe these accounting policies are particularly important to the portrayal and understanding of our financial position and results of operations and require application of significant judgment by our management. In applying these policies, management uses its judgment in making certain assumptions and estimates. Our critical accounting policies are more fully described under the heading "Summary of Significant Accounting Policies" in Note 2 of the Notes to the Consolidated Financial Statements and under "Management's Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies" in our Annual Report on Form 10-K as filed with the SEC on April 1, 2009. The policies set forth in our Form 10-K have not changed.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 2009 VERSUS THREE MONTHS ENDED JULY 31, 2008

Revenue
                                           THREE MONTHS ENDED
                                                JULY 31,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                          2009            2008
(In thousands, except percentages)
Revenue:
United States                            $   60,040     $   60,756        $                    (716 )             (1 )%
International                                18,886         22,576                           (3,690 )            (16 )%
Total                                    $   78,926     $   83,332        $                  (4,406 )             (5 )%

The decrease in both total revenue and international revenue for the three months ended July 31, 2009 versus the three months ended July 31, 2008 was primarily the result of the negative effect foreign exchange rates had on our international subsidiaries' revenue when converted to U.S. dollars.

Costs and Expenses
                                           THREE MONTHS ENDED
                                                JULY 31,                DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                           2009            2008
(In thousands, except percentages)
Cost of revenue                          $     7,524     $    9,830        $                  (2,306 )            (23 )%
As a percentage of revenue                        10 %           12 %
Cost of revenue - amortization of
intangible assets                                 32          1,740                           (1,708 )            (98 )%
As a percentage of revenue                         -              2 %

The decrease in cost of revenue in the three months ended July 31, 2009 versus the three months ended July 31, 2008 was primarily due to a reduction in royalty fees of $1.1 million as a result of both the decrease in revenue and a shift in product mix away from royalty-bearing products. Additionally, $0.7 million of the decrease in cost of revenue was attributed to reductions in personnel and consulting expenses as a result of our cost-savings initiatives.

The decrease in cost of revenue - amortization of intangible assets in the three months ended July 31, 2009 versus the three months ended July 31, 2008 was primarily due to certain intangible assets becoming fully amortized during fiscal 2009.

                                           THREE MONTHS ENDED
                                                JULY 31,                DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                           2009            2008
(In thousands, except percentages)
Research and development                 $     9,706     $   12,519        $                  (2,813 )            (22 )%
As a percentage of revenue                        12 %           15 %

The decrease in research and development expense in the three months ended July 31, 2009 versus the three months ended July 31, 2008 was primarily due to cost reductions related to outside service contractors and outsource partners of $2.2 million as well as decreases in compensation and benefits expense of $0.2 million attributed to our cost-saving initiatives.

                                           THREE MONTHS ENDED
                                                JULY 31,               DOLLAR INCREASE/(DECREASE)         PERCENT CHANGE
                                          2009            2008
(In thousands, except percentages)
Selling and marketing                    $   24,387     $   26,099        $                  (1,712 )               (7 )%
As a percentage of revenue                       31 %           31 %

The decrease in selling and marketing expense in the three months ended July 31, 2009 versus the three months ended July 31, 2008 was primarily due to net reductions of $2.1 million in sales compensation and benefits, which includes a reduction of non-field sales personnel partially offset by increased sales incentive expenses. This net reduction was partially offset by a major customer event that took place during the first quarter of fiscal 2009 which occurred in the second quarter of fiscal 2010. As a result we had an $0.8 million increase in expenses for the three months ended July 31, 2009 versus the three months ended July 31, 2008.

                                           THREE MONTHS ENDED
                                                JULY 31,                DOLLAR INCREASE/(DECREASE)         PERCENT CHANGE
                                           2009            2008
(In thousands, except percentages)
General and administrative               $     9,400     $    9,433         $                   (33)                  0  %
As a percentage of revenue                        12 %           11 %

General and administrative expense in the three months ended July 31, 2009 was approximately the same as in the three months ended July 31, 2008. An increase in executive bonus expense in the second quarter of fiscal 2010 of $1.7 million was offset by reductions of $0.5 million in professional fees related to our business realignment strategy, which was substantially completed in fiscal 2009, and reductions in insurance premiums, banking service fees and outside contractor expenses of $0.8 million.

                                             THREE MONTHS ENDED
                                                  JULY 31,                 DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                             2009            2008
(In thousands, except percentages)
Amortization of intangible assets          $     2,117     $    2,741          $                   (624 )            (23 )%
As a percentage of revenue                           3 %            3 %
Merger and integration related expenses              -     $      240                              (240 )           (100 )%
As a percentage of revenue                           0 %            0 %
Restructuring                                        4     $        -                                 4                *
As a percentage of revenue                           0 %            0 %
SEC investigation                                    -     $      (13 )                             (13 )           (100 )%
As a percentage of revenue                           0 %            0 %


____________

* Not meaningful

The decrease in amortization of intangible assets for the three months ended July 31, 2009 versus the three months ended July 31, 2008 was primarily due to certain assets becoming fully amortized during fiscal 2009.

During the three months ended July 31, 2008, we incurred merger and integration expenses related to the NETg acquisition. We completed our efforts to integrate NETg's operations during fiscal 2009.

                                           THREE MONTHS ENDED
                                                JULY 31,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                          2009            2008
(In thousands, except percentages)
Other (expense) income, net             $     (605 )    $        6         $                   (611 )              *
As a percentage of revenue                      (1 )%            0 %
Interest income                                 68      $      575                             (507 )            (88 )%
As a percentage of revenue                       0 %             1 %
Interest expense                            (2,032 )    $   (3,664 )                          1,632              (45 )%
As a percentage of revenue                      (3 )%           (4 )%


____________

* Not meaningful

The increase in other (expense) income, net in the three months ended July 31, 2009 versus the three months ended July 31, 2008 was primarily due to foreign currency fluctuations. Due to our multi-national operations, our business is subject to fluctuations based upon changes in the exchange rates between the currencies used in our business.

The reduction in interest income in the three months ended July 31, 2009 versus the three months ended July 31, 2008 was primarily due to a reduction in our short-term investments attributed to our share buyback program and our significant long term debt repayments as well as lower interest rates.

The decrease in interest expense in the three months ended July 31, 2009 versus the three months ended July 31, 2008 was primarily due to $49.2 million in principal debt repayments made against our long-term debt since July 31, 2008.

Provision for Income Taxes
                                           THREE MONTHS ENDED
                                                JULY 31,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                           2009            2008
(In thousands, except percentages)
Provision for income taxes               $     6,016     $    6,845        $                  (829)             (12)  %
As a percentage of revenue                         8 %            8 %

For the three months ended July 31, 2009 and 2008, our effective tax rates were 25.9% and 38.8%, respectively. The decrease in the current year effective tax rate is primarily due to a change in the geographical distribution of worldwide earnings as a result of our business realignment strategy that took effect at the beginning of fiscal 2010. For the three months ended July 31, 2009 and 2008, the effective tax rate was higher than the Irish statutory rate of 12.5% due primarily to earnings in higher tax jurisdictions outside of Ireland.

SIX MONTHS ENDED JULY 31, 2009 VERSUS SIX MONTHS ENDED JULY 31, 2008

Revenue
                                            SIX MONTHS ENDED
                                                JULY 31,                DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                          2009            2008
(In thousands, except percentages)
Revenue:
United States                           $   118,752     $   119,809        $                  (1,057 )             (1 )%
International                                36,613          45,166                           (8,553 )            (19 )%
Total                                   $   155,365     $   164,975                           (9,610 )             (6 )%

The decrease in both total and international revenue for the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily the result of the negative effect foreign exchange rates had on our international subsidiaries' revenue when converted to U.S. dollars.

Costs and Expenses
                                           SIX MONTHS ENDED
                                               JULY 31,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                          2009           2008
(In thousands, except percentages)
Cost of revenue                         $   14,997     $   18,639        $                  (3,642 )            (20 )%
As a percentage of revenue                      10 %           11 %
Cost of revenue - amortization of
intangible assets                               64          3,480                           (3,416 )            (98 )%
As a percentage of revenue                       -              2 %

The decrease in cost of revenue in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was partially due to a reduction in royalty fees of $0.9 million as a result of both the decrease in revenue and a shift in product mix away from royalty-bearing products. Also contributing to the decrease in cost of revenue was a $0.8 million decrease related to reductions in personnel and $1.7 million in lower expenses for hosting, outside contractor, maintenance and facility charges as a result of both our recent cost-saving initiatives carried out in the fourth quarter of fiscal 2009 and certain NETg integration initiatives being substantially completed in fiscal 2009.

The decrease in cost of revenue - amortization of intangible assets in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to certain intangible assets becoming fully amortized during fiscal 2009.

                                           SIX MONTHS ENDED
                                               JULY 31,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                          2009           2008
(In thousands, except percentages)
Research and development                $   18,704     $   25,998        $                  (7,294 )            (28 )%
As a percentage of revenue                      12 %           16 %

The decrease in research and development expense in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to a reduction in outsourced development fees of $5.1 million as well as a decrease in compensation and benefits expense of $1.3 million primarily due to the cost-saving initiatives we instituted in the fourth quarter of fiscal 2009. The reduction in outsource development fees was also due to the inclusion of costs attributable to the NETg acquisition in the six months ended July 31, 2008, which included maintaining multiple platforms and product commitments assumed prior to the completion of the integration.

                                           SIX MONTHS ENDED
                                               JULY 31,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                          2009           2008
(In thousands, except percentages)
Selling and marketing                   $   46,798     $   55,798        $                  (9,000 )            (16 )%
As a percentage of revenue                      30 %           34 %

The decrease in selling and marketing expense in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to a decrease in compensation and benefits expense of $6.8 million. This decrease was primarily the result of a reduction in our field support personnel as part of our cost-saving initiatives as well as a reduction in commission expense attributed to when certain commissions were earned in fiscal 2008 as a result of a one-time change to the structure of our compensation plan that year. We also had a reduction in marketing expenses of $1.0 million and a reduction in travel expenses of $0.9 million as a result of our cost-saving initiatives.

                                           SIX MONTHS ENDED
                                               JULY 31,               DOLLAR INCREASE/(DECREASE)         PERCENT CHANGE
                                          2009           2008
(In thousands, except percentages)
General and administrative              $   17,157     $   18,324        $                  (1,167 )               (6 )%
As a percentage of revenue                      11 %           11 %

The decrease in general and administrative expense in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to a reduction of $1.8 million in legal and professional fees associated with our business realignment strategy, which was substantially completed during fiscal 2009. In addition, we had a decreases in facility and rent expense of $0.4 million as well as decreases in banking fees and insurance expense of $0.4 million. These reductions in cost were partially offset by an increase in compensation and benefits of $1.5 million primarily due to executive bonuses recognized in the three months ended July 31, 2009.

                                              SIX MONTHS ENDED
                                                  JULY 31,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                            2009            2008
(In thousands, except percentages)
Amortization of intangible assets          $    4,572     $    5,737        $                  (1,165 )            (20 )%
As a percentage of revenue                          3 %            3 %
Merger and integration related expenses             -     $      761                             (761 )           (100 )%
As a percentage of revenue                          0 %            0 %
Restructuring                                      56     $        -                               56                *
As a percentage of revenue                          0 %            0 %
SEC investigation                                   -     $       49                              (49 )           (100 )%
As a percentage of revenue                          0 %            0 %


____________

* Not meaningful

. . .